Custom, Excise & Service Tax Tribunal
Shasun Chemicals And Drugs Ltd vs Commissioner Of Customs, Chennai on 5 August, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.C/263/03
[Arising out of Order-in-Appeal No.C.Cus.252/2003 dated 30.5.2003 passed by the Commissioner of Customs (Appeals), Chennai]
For approval and signature:
Honble Ms.JYOTI BALASUNDARAM, Vice-President
Honble Dr. CHITTRANJAN SATAPATHY, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? :
3. Whether the Members wish to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Shasun Chemicals and Drugs Ltd.
Appellant/s
Versus
Commissioner of Customs, Chennai
Respondent/s
Appearance :
Shri S.Murugappan, Advocate Shri T.H.Rao, SDR For the Appellant/s For the Respondent/s CORAM:
Honble Ms.Jyoti Balasundaram, Vice-President Honble Dr. Chittaranjan Satapathy, Technical Member Date of hearing : 5.8.2009 Date of decision : 5.8.2009 Final Order No.____________ Per Jyoti Balasundaram Vide the impugned order, the Commissioner of Customs (Appeals) has accepted the contention of the Revenue that royalty of US$ 2 per Kg. and technical know-how/option fee of US$ 9 lakhs + US$ 10 lakhs is required to be added to the assessable value of S-ibuprofen imported by the appellants herein from Japan under Rule 9(1) (c) of the Customs Valuation Rules, 1988.
2. We have heard both sides and carefully perused the terms of the Option /License Agreement entered into between M/s.Nagase & Co., Japan and the appellants. The relevant clauses are reproduced herein below :-
OPTION AGREEMENT :-
Prior to entering into the Licence Agreement, SHASUN desires to conduct experimental and confirmation works for manufacturing S-Ibuprofen and in light of such desire of SHASUN, NAGASE is willing to grant to SHASUN an option to enter into the License Agreement.
1. Definitions :
1.1 Except as otherwise defined herein, the terms used in this Option Agreement shall have the meanings as defined in the Licence Agreement.
2. Grant of Option :
2.1 Subject to the payment of the option fee in the amount of nine hundred thousand US dollars (US$ 900,000) in the manner as set forth in Section 3 hereof and other terms and conditions and the Option Agreement, NAGASE hereby grants to SHASUN an option to enter into the Licence Agreement, for the period of two (2) month after, NAGASEs receipt of the first payment of such option fee (the Option Period).
LICENSE AGREEMENT :-
1.1 LICENSED PRODUCT means S-ibuprofen and the salts of either of the foregoing in the form of bulk raw material. 1.2 LICENSED TECHNOLOGY means all technical information of NAGASE available to it, patentable or otherwise, which relates to the process of manufacturing the LICENSED PRODUCT through chemical resolution method using PBA and which is required for LICENCEE to manufacture, use and/or sell the LICENSED PRODUCT. 1.3 PBA means (+)-3-methyl-2-phenylbutylamine (CAS No.106498-32-2) which is NAGASEs proprietary resolving agent required for LICENSEE to implement the manufacture of the LICENSED PRODUCT under the LICENCED TECHNOLOGY. 1.4 LICENSE FEE means a fixed sum of one million U.S. Dollars (US$ 1,000,000) which, together with the ROYALTY,shall constitute the consideration to be paid by LICENSEE to NAGASE for the rights and Licenses granted under this Agreement. 1.5 ROYALTY means two U.S. Dollars (US$ 2) to be paid by LICENCEE to NAGASE per kilogram of the LICENSED PRODUCT sold by LICENSEE to LICENCEE ACCOUNTS.
3. We have gone through the entire agreement and find that the payment by the assessees cannot be said to be in relation to the imported goods but only in relation to the final products to be manufactured by them in India. The learned SDR has not been able to bring to our notice any clause in the relevant agreements which would establish that the payment was in relation to the imported goods. We, therefore, accept the contention of the assessees that the payments of royalty and technical know-how/option fee are not includible in the declared price of goods imported, set aside the impugned order and allow the appeal.
(Operative part of the order was pronounced
in open court on 5.8.09)
(Dr. CHITTARANJAN SATAPATHY) (JYOTI BALASUNDARAM)
TECHNICAL MEMBER VICE-PRESIDENT
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